All eyes were on the Federal Reserve today, which wrapped up
its two-day Federal
Open Market Committee meeting and published its monetary
policy statement. Stocks were flat ahead of the
announcement, surged right after the announcement, and fell back
to break-even by the end of the trading session.

The big announcement: The Fed is now employing quantitative
thresholds to guide monetary policy. This is also known as
the "Evans
rule" after Chicago Fed President Charles Evans who first
proposed it. Specifically, the Fed now plans to keep interest
rates "exceptionally low" as long as inflation is at or below 2.5
percent and the unemployment rate is above 6.5 percent.

The Fed also announced that it would purchase up to $45
billion worth of Treasury securities monthly in its efforts to
keep interest rates low. This is also being referred to as
quantitative easing, or QE4.

During his
press conference today, Bernanke said the 6.5 percent
unemployment threshold should not be confused with the Fed's
long-run unemployment target which is 5.2-6.0 percent. He
also made clear that the new program does not mean the Fed is
on "autopilot," meaning that breaching the quantitative
thresholds wouldn't automatically trigger tighter policy.

Bernanke also stressed that
monetary policy has its limits. He noted that
"Clearly, the fiscal cliff is having effects on the
economy." Also, he warned that if we go over the fiscal
cliff, "I don't think the Fed has the tools to offset that
event."

JP Morgan's top strategist Tom Lee doesn't think the market
will be too pleased with this ongoing uncertainty. In his
new 2013 outlook, he forecasts the S&P 500 falling to 1,400
in the middle of 2013 before rallying to 1,580 by year-end.